IMF Lifts UK Growth Forecast to 1.3% for 2026 but Warns Energy Prices Will Bite in 2027
TL;DR: The IMF has raised its UK growth forecast for 2026 to 1.3%, up from 1.0% in July. But it expects growth to slow to 1.2% in 2027, with inflation averaging 3.3% this year and 2.8% next year, still above the Bank of England 2% target, as higher energy prices and long term interest rates…
TL;DR: The IMF has raised its UK growth forecast for 2026 to 1.3%, up from 1.0% in July. But it expects growth to slow to 1.2% in 2027, with inflation averaging 3.3% this year and 2.8% next year, still above the Bank of England 2% target, as higher energy prices and long term interest rates weigh on spending.
What happened: the IMF UK growth forecast in full
The International Monetary Fund published its October 2026 World Economic Outlook on Tuesday 13 October 2026, during its annual meetings in Bangkok. The report, titled Resilience Under Strain, Urgent Choices, upgrades the UK for this year and downgrades it for next year.
For 2026, the IMF now expects the UK economy to grow by 1.3%. That is up from 1.0% in its July forecast and 0.8% in April. For 2027, it has cut its forecast to 1.2%, down from 1.3% before. The Fund says higher energy prices and higher long term interest rates will weigh on household consumption and business investment next year.
The inflation picture is harder. The IMF expects UK consumer price inflation to average 3.3% in 2026 and 2.8% in 2027. The 2027 figure is higher than the 2.4% it forecast before, and it keeps inflation above the Bank of England 2% target for another year. The most recent official figure, from the Office for National Statistics, put inflation at 3.1% in August.
On jobs, the IMF expects UK unemployment to average 5.3% in both 2026 and 2027. That is a better outcome for this year than the 5.6% it had forecast before. On the public finances, the Fund expects UK government borrowing to fall from 3.8% of GDP in 2026 to 3.0% in 2027 and 1.4% in 2031, while gross government debt stays close to 102% of GDP this year.
Worldwide, the IMF expects global growth of 3.1% in 2026 and 3.4% in 2027, with global inflation of 4.7% this year easing to 4.1% next year. It says energy importing economies outside the technology supply chain face the hardest outlook, and that risks are skewed to the downside if conflicts escalate.
Key numbers from the IMF forecast
| Measure | 2026 | 2027 |
|---|---|---|
| UK economic growth | 1.3% | 1.2% |
| UK inflation (average) | 3.3% | 2.8% |
| UK unemployment (average) | 5.3% | 5.3% |
| UK government borrowing | 3.8% of GDP | 3.0% of GDP |
| Global economic growth | 3.1% | 3.4% |
Source: IMF World Economic Outlook database, October 2026. Borrowing is general government net lending, where a negative figure in the database means borrowing.
What it means for your money
Prices: Inflation averaging 3.3% this year and 2.8% next year means the cost of living keeps rising, just more slowly than in the worst years. Nothing in this forecast says prices fall. It says they rise at a slower pace in 2027 than in 2026.
Our worked example: take a weekly shop that costs £50 today. If its price rose in line with the IMF average inflation forecast of 3.3% for a year, it would cost £51.65, which is £85.80 extra over a year. This is an illustration using the average rate. Your own shop will differ, because food, energy and other items move at different speeds.
Mortgages and borrowing: The IMF does not set UK interest rates, and this report makes no rate decision. What it does show is inflation staying above the 2% target through 2027, with higher long term interest rates already weighing on the economy. Long term rates are part of what lenders price fixed mortgages from, so this forecast is not a signal that borrowing is about to get cheap.
Savings: With inflation at 3.3%, money in an account paying less than that loses spending power over the year. Comparing your savings rate against the inflation rate, not just against zero, is the honest test. See our guide to the best savings accounts in the UK for current rates.
Jobs: An unemployment average of 5.3% in both years, with no rise forecast between them, points to a jobs market that stays soft but stable on these numbers, rather than one falling sharply.
The Budget: These forecasts land two weeks before the Autumn Budget on Wednesday 28 October 2026. Borrowing falling towards 1.4% of GDP by 2031 on the IMF path is the backdrop against which the Chancellor’s tax and spending choices will be judged.
UK growth forecast: questions readers are asking
Is the UK economy growing or shrinking? Growing, on the IMF numbers: 1.3% in 2026 and 1.2% in 2027. Both are slow by historic standards, but neither is a recession forecast.
Why did the IMF upgrade 2026 but cut 2027? The Fund says economies have proved more resilient to the energy price shock this year, with AI investment supporting growth. For next year, it expects higher energy prices and higher long term interest rates to weigh on consumption and investment.
Will inflation come back to 2%? Not in this forecast. The IMF has 2.8% for 2027, above target, and higher than the 2.4% it expected before.
Does this mean interest rate cuts are coming? The report does not say that, and we do not predict rates. It shows inflation above target through 2027, which is the backdrop the Bank of England works against when it sets rates.
Source: International Monetary Fund, World Economic Outlook, October 2026, published 13 October 2026, and the IMF World Economic Outlook database (UK series, updated 13 October 2026). Previous forecast comparisons are as reported from the IMF July 2026 update.
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